The nation’s economists are determined to protect us from the scourge of inflation, no matter the cost, but there’s a black hole in their thinking.
Led on by crusading Reserve Bank governors, the nation’s economists are determined to protect us from the scourge of inflation, no matter the cost in jobs lost.
In raising their prices, businesses aren’t being opportunistic, they’re only doing what comes naturally, playing their allotted role in allowing the “price mechanism” to bring demand and supply back into balance. This will cut the workers’ real incomes and lower their standard of living, of course, but that can’t be helped. It’s the only way we can make them stop spending as much, so businesses won’t be able to get away with continuing to raise their prices by more than 2.5 per cent.But cutting real wages probably won’t be enough to stop businesses raising their prices so high, so we’ll need to raise interest rates andYet another worry is our return to full employment.
Just so. When, as now, the Reserve Bank and the government accidentally overstimulate the economy, allowing businesses to increase their prices by more than they need to, what we always do to stop businesses raising their prices is bash up their customers until the fall-off in households’ spending – caused partly by people losing their jobs – makes it impossible for businesses to keep increasing their prices.
The few big players compete on marketing and advertising, and using minor product differentiation, but never on price. When prices rise, they rise together – and rarely come back down.
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